Leadership Lessons From the Dancing Guy

On May 17th, I reposed an article from Jason Kottke blog titled “Specialists” (http://kottke.org/13/05/the-three-types-of-specialist). He reposted an excerpt from Kurt Vonnegut’s Bluebeard about the three types of specialists needed for the success of any revolution: the genius, the first follower who invests their reputation to validate the genius, and the explainer completes the trio and acts as an “evangelist.”

Later somebody pointed out that Derek Sivers, a revolutionary in his own right (sivers.org), posted a video three years ago that demonstrated this. Jason reposted this and called it “Leadership Lessons From the Dancing Guy” (http://kottke.org/13/05/leadership-lessons-from-the-dancing-guy). The video itself is on YouTube (http://youtu.be/fW8amMCVAJQ).

In a sense, these three, Vonnegut, Kottke, and Sivers explained the Specialists, then acted like them. They probably won’t create a movement since these events happened at different times, they travel in different worlds, and are each geniuses in their own right, but it was a special moment to have the explanation and demonstration come together in this way.

This got me thinking about niche technology businesses and typically how poorly they leverage their uniqueness. If they are surviving in their challenging marketplaces where customers, industries, and technologies are fragmented, they are probably doing something unique and interesting. A future post will give some examples of the ways these types of companies can “get the word out” about their uniqueness and use these types of messages to increase their sales and market awareness of their brands.

Part 5: A Few Niche Technology Webstore Examples

To finish this series, below are a few webstores that illustrate the principles in the previous article. Interestingly, it was difficult to find niche technology businesses that had a webstore at all and some even made it difficult to find who to contact to buy their products. One company had an entire map of the United States and allowed you to hover over your area to get contact information for your local sales representative, a great idea. Unfortunately, there were only two “local” representatives for the entire country! This told me a lot about their low sales volume and probably the level of support that would be available. On the other extreme, a few companies provided detailed product information, delivery status, and pricing without even requiring the user to create an account, a very different philosophy. Below are three of the best I found.

Omega Engineering – omega.com. Omega was one of the first instrumentation webstores and is still excellent. They typically do not sell any products for more than $5,000 so they have no need to omit large/complex systems. They extensively use “Product Finders” to help a customer narrow down dozens of similar choices to a manageable set of options.

Omega Engineering 1

They also have excellent product information pages with pricing, availability, and related products. The webstore has a very simple structure, just change the quantity and “Add to Cart.” Occasionally, there is a “consult sales” tag to prevent customers from ordering incorrect or conflicting configurations.

Omega Engineering 2

Measurement Computing – mccdaq.com. They specialize in more complex data acquisition systems and their webstore reflects that. It still has a simple “change the quantity” and “Add to Cart” methodology, but adds detailed product information such as Reviews, Q&A, Overview, Specifications, Related Products, and Included/Optional Software. If you decide to adopt a structure like this, make sure that a reasonable percentage of your products actually do have reviews, Q&A, etc.

Measurement Computing

National Instruments – ni.com. NI is the gorilla in the marketplace selling hundreds of different hardware and software products and options. It is hard to say that this a good example since each page is so crammed full of products, options, phone numbers, and prices, but there are some great features that are useful to highlight such as seeing related products as a list in the left hand column. At a glance you can see the overall product structure for a category. The screenshot below shows available sampling rates, voltages, number of channels, and electrical isolation. This is useful to understand the range of options available. Also, there is a “parts list” separate from the shopping cart. In creating a complex system, it can be easier to narrow down choices into a parts list and then add the parts for the final configuration to a shopping cart at the end.

National Instruments Products

Finally, for complex systems, NI includes a Services tab to provide links to relevant services. You can develop entire new revenue streams by providing something like NI’s “System Configuration and Deployment Services.”

National Instruments Services

These are just a few example of unique “state of the practice” solutions for niche technology businesses webstores. In today’s world, instant access to information is the norm and taking time to plan at least some simple first steps toward a webstore might payoff in the short term by decreasing transaction costs and increasing revenue. Also, you may want to simultaneously consider your internal transaction costs. A webstore could have expanded features on your intranet to help provide accurate, timely product information to support and sales departments.

Part 4: Transaction Costs and the Webstore

This discussion is primarily for businesses in niche technology business-to-business markets. This is not for you if you are selling your unique blend of iced tea teabags to the general public. If you are selling gas chromatography systems and supplies, you know you have a problem. Your customers probably say they want an E-commerce option, but if you have tried to create this capability, you might have come across the common phenomena where once it is built (at significant cost), it barely gets used. Buyers still call their “friends” in your order entry department. Think about it, the transaction cost is lower. They don’t have to learn your new webstore, they get to talk to a friendly / experienced / professional human, and they are sure to get the right part that they have ordered ten times before. So if you have built a reasonably good web store, how do you get customers to use it?

Here is an example from what used to be an incredibly conservative industry, airlines. As a young upstart, Southwest Airlines spent years “bribing” customers with double frequent flier points to purchase on their website. It was a coup in this market area that was dominated by travel agents using the industry standard system, Sabre. Historically, Southwest didn’t want to pay the 10% commission to travel agents since in the early days, they were competing with travel by car (believe it of not!). Later, their strong brand and great prices made it possible for them to get customers to book directly with the company and later still, online. The bribe worked and while they use Sabre as their backend booking technology, they still do not need to pay commission or publish fares on websites like Travelocity.

Why is this important? Because Southwest seems to have done it right through a carefully selected combination of factors that made online booking the lowest in terms of transaction costs. For many niche technology businesses, this combination takes careful planning to implement. The good news is that the technical implementation of a web store is not difficult for smaller businesses. Here are a list of some transaction cost related factors to consider:

  • Sensible Offerings – Is somebody going to buy a ten thousand dollar instrument on a web store? Probably not, so leave it off or direct customers to online system configuration tools that link to the sales team. A quick analysis of previous year sales should show a large percentage of small sales from accessories, expendables, and add-ons. These are typically a better initial focus and low risk as the initial web store is rolled out.
  • Usability – Your website and web store have to be fast and efficient including customer registration and payments. Most buyers will begin calling you after that first 20 second wait for a page of products to load.
  • International – Use IP location technology to determine the location of your visitor and offer appropriate content / pricing.
  • Key Accounts – Prearrange these larger online relationships. Here are some suggestions: a hotline number to ease the transition for the first online sales, a predetermined list of their most commonly purchased products, a pre-created account with billing information.
  • Pricing – Consider special online pricing. A web store can reduce your internal fixed and transaction costs, so pass on some of those savings.
  • Integration – A web store should smoothly integrate with your website. Product information should be complete and accurate.
  • Services – Consider adding and promoting services to you web store such as tracking and adding instrument calibration as an option to certain quotes. Once a customer has “invested” by spending time on your web store, the probability of add-on sales increases dramatically.
  • Promotions – A web store is a great to promote new products, updates, and services. If a buyer thinks they are going to potentially get a “bonus” when they visit the web store, you can be sure they will use it often.

To summarize, a web store is a sales channel. Considering transaction costs at each step of the process can shift the intent from an unpleasant project to a vibrant E-commerce “annuity” portion of your business.

Part 3: Entrepreneurs, Transaction Costs, and Sales

Part 2 ended with the invitation to take a moment and think about your entire customer relationship in terms of transactions costs. I used the example of Southwest Airlines’ excellent customer service. Another great example of extremely low transaction cost is Amazon.com. With free shipping (Amazon Prime), huge selection, and a generous return policy, the monetary and psychological transaction costs are minimal. Costco used to be similar, but declining quality increased the transaction cost. Once the impression was made that many items tended to have “strange” problems, even the return policy did not completely compensate.

In niche technology markets, the transaction costs can make or break a business. Should you charge a restocking fee and increase transaction costs; or not charge a fee and increase internal costs? Do you provide excellent on-line support, add customer service representatives / application engineers, create a web store, or maybe all of these? It is a balancing act, but using the perspective of transaction costs is one way to add clarity. Adding sales engineers is particularly challenging since a well trained, well managed team can decrease external transaction costs dramatically, but can increase internal transaction costs. Any sales manager can give you dozens of examples of even good salespeople disproportionately increasing internal organizational stresses and workloads. New systems end up being created to address production planning challenges, R&D resource usage, and management mindshare just to name a few.

In the final upcoming post, an analysis of one popular method of decreasing transaction costs, the web store, will be provided.